Two small-cap picks, a pair of midcaps and a large-cap stock

Best Stocks #4 (Midcap): SVB Financial (SIVB)

I never would have thought one of my picks for the next 20 years would be a bank — let alone one that focuses on entrepreneurs — but here I am.

SVB Financial (SIVB) is a 31-year-old financial services company that includes a California bank (Silicon Valley Bank) that I’ve liked for a some time.

At the end of 2012, I suggested that SIVB would do well in 2013 because banks were moving to specialize, and it helps entrepreneurs in the U.S. and elsewhere grow their businesses. I’m happy — SIVB stock is up 78% year-to-date — but the question is whether the company will keep it up.

Well, I don’t know about next year or the one after that, but I do know that there is no regional bank better positioned to take advantage of the entrepreneurial spirit appearing to take root in countries like China, India and Israel. During the past 10 years, SIVB stock has grown its net income from virtually nothing to almost $200 million with $1 billion in revenue. That growth story has produced an 11% annualized total return in that time — 385 basis points better than the S&P 500, and a full 10 percentage points clear of its regional banking peers.

There’s nothing rotten with this apple.

I know it’s hard to pick stocks that are going to do well in three years, let alone 20, but I see SIVB becoming a large-cap by 2020.